Hedge Fund Execs Get Long Jail Term In Life Settlements Fraud

In another financial scandal, two hedge fund executives received long jail terms for their parts in a $100 million life-settlement scam, according to the U.S. Justice Department.

Adley H. Abdulwahab, 36, a part-owner of A&O Resource Management Ltd. was just sentenced to 60 years in prison in federal court in Richmond, Virginia; A&Oâ€™s co-founder, Christian Allmendinger, 40, received a 45-year term, said Businessweek, citing federal prosecutors.

Both executives sold â€œbonded life settlementsâ€ and guaranteed 10-20% returns, said the indictment, which also said that the men misrepresented their qualifications and prior successes, all while lavishing themselves with an array of personal itemsâ€”luxury, multi-million dollar homes; expensive cars; and, even, a 15-carat diamond rinkâ€”with investor money and without investor consent, according to the Justice Department, said Businessweek.

â€œThe victims of A&Oâ€™s scam were looking for a conservative investment, and they were manipulated into believing A&O was a safe, secure, no-risk investment,â€ U.S. Attorney Neil MacBride, said in the statement, from Alexandria, Virginia, reported Businessweek. â€œIt was all a big, fat lie; A&O was a sham, a financial house of cards waiting to collapse,â€ added MacBride.

Both men were charged in 2010 in an 18-count indictment alleging conspiracy, mail fraud, securities fraud, and money laundering in a scam that victimized over 800 American and Canadian investors, Businessweek noted. In March, Allmendinger was found guilty on 7 counts; Abdulwahab was convicted in June, following a trial, on all 18 counts, said Businessweek.

Utilizing funds for investors in 37 states, A&O invested in life insurance policies, the Justice Department explained. The insurers receive cash and the investor pays the policies premiums; when the insured dies, the death benefit is paid to the investor, Businessweek explained. But, A&O purchased bonds that did not deliver on promised returns, said federal investigators because, for instance, there were insufficient financial instrumentsâ€”bond instruments or life insurance policiesâ€”with which to pay investors, wrote Businessweek.

This is not the first time in recent months that investors have been duped by those in the financial industry. For instance, broker-dealer UBS duped customers with its â€œ100% Principal Protection Notes,â€ (PPNs) issued by Lehman Brothers. The firm has been accused of misleading its brokers and causing catastrophic damage to its investors.

And, of course, there is Bernard Madoff, 71, who was sentenced to 150 years in prison for running a massive Ponzi scheme, estimated to be the largest in history. Bernard L. Madoff Investment Securities is the investment firm that served as a â€frontâ€ for the scam.

The U.S. Attorneyâ€™s office in New York said the losses suffered by Madoffâ€™s 2,336 victims exceeded $13 billion, at last count.